Endeavour Mining Acquisition of True Gold Mining CREATING A PREMIER AFRICAN GOLD PRODUCER
Transaction Highlights Endeavour to acquire True Gold for CDN$0.57 per share True Gold shareholders receive 43% spot premium 1 and 33% 20d VWAP premium 1 – – On an issued share basis, True Gold is valued using spot price at CDN$226 million and using 20d VWAP at CDN$191 million Mine and Project Location Map – True Gold shareholders will represent 20.9% of the enlarged shareholder base – Strategic partnership with La Mancha and Naguib Sawiris will exercise its anti-dilution right providing CDN$82.6 million new equity into Endeavour Mining – Pro forma market cap of CDN$1.08 billion 2 True Gold’s low cost Karma project – Karma construction +96% complete, first gold pour anticipated late-March/early-April – 11 year mine life based on Reserves (8.5 years) and North Kao (Inferred, 2.5 years) – 110 – 120 koz per year at AISC/oz of approximately $700 (years 1-5) – Attractive fit for Endeavour’s West African operating portfolio – Karma extends mine life, increases production, lowers group AISC and increases free cash flow generation Enhances financing plan to accelerate Houndé construction – Endeavour Mining’s strong liquidity of US$301.5 million and improved net debt position supports Karma ramp up, Houndé construction, expanded exploration programs, and future growth 1 Using market prices as of March 3, 2016 2 On an basic issued share basis CREATING A PREMIER AFRICAN GOLD PRODUCER 2
Transaction Highlights Intelligent growth of low cost production – Endeavour Mining has a successful “buy and build” strategy focused on growing its low cost gold production – The Karma Mine provides a material upgrade to the recently divested Youga Mine – Proactive portfolio management focused on cash flow maximization – Following Karma’s production ramp up, intend to commence construction of the Houndé project, our next low cost mine A premium for True Gold shareholders and value accretion for Endeavour Mining shareholders – True Gold shareholders receive a meaningful ownership stake in a larger diversified West African producer – Endeavour Mining shareholders gain a new, low cost mine that boosts group production while reducing group AISC/oz – Endeavour Mining will integrate Karma into its existing operations management structures and does not anticipate an increase in its corporate G&A expense, also eliminates True Gold G&A costs ( US$6m/year). – Across a range of valuation metrics and contributions, this acquisition is value accretive to Endeavour Mining shareholders Valuation upside as Endeavour Mining continues to grow its low cost production – Transaction demonstrates the strategic partnership with La Mancha and Naguib Sawiris, our long term partner with a shared vision of building a leading African-focused gold producer – Endeavour Mining is positioned as one of West Africa’s premier gold miners CREATING A PREMIER AFRICAN GOLD PRODUCER 3
Indicative Terms – C$0.57 Offer Value • 0.044 Endeavour shares for every TGM share, equivalent to C$0.57 per TGM share (close, March 3, 2016) • Offer to be conducted via court-approved Canadian plan of arrangement Offer: • Endeavour to provide TGM with US$15 million Bridge Financing • Spot close: 43.4% Implied Premium to TGM 1 : • 20-day VWAP: 32.7% • Anti-dilution right permits La Mancha to buy new Endeavour Mining shares to maintain 30% ownership La Mancha Anti-Dilution • Following completion of the TGM premium acquisition, La Mancha has committed to purchase approximately Right 7.5 million Endeavour Mining Shares at CDN$10.94 (in line with 20d VWAP) for CDN$82.6 million • US$15 million convertible note, interest rate of LIBOR +4%, twelve month term • Use of Proceeds: Karma project completion, working capital and/or refinancing of Auramet facility Bridge Financing: • Conversion price for the principal amount based on TGM 5d VWAP at drawdown, interest will accrue from drawdown and may be paid in cash or TGM shares based on future prevailing market price • Reciprocal break fee - 2% of acquisition value or CDN$4.5 million • No solicitation Other Terms • Provision for superior proposals with the right to match within 6 calendar days of superior proposal • Lock-ups from each director & officer • TGM shareholder approval – 66 ⅔ % of shares voted Shareholder Approvals • Endeavour Mining shareholder approval - 50%+1 of shares voted • Information Circular sent to shareholders in March 2016 • Special Shareholder Meeting to take place in third week of April 2016 Indicative Timeline • Transaction closing expected before end of April 2016 1 Market data as of March 3, 2016 CREATING A PREMIER AFRICAN GOLD PRODUCER 4
Pro Forma Ownership & Capital Structure Current Ownership Structure La Mancha Liberty M&M (Sawiris) 19% 30% Teck 11% Other EDV Other TGM 70% 69% Pro Forma Ownership Structure Liberty M&M 4.0% La Mancha Issued and Outstanding Pro Forma Issued Pro Forma (Sawiris) Other TGM Shares (M) Shares (M) Ownership TGM 30.0% 16.8% shareholders Endeavour Mining 59.04 59.04 70.19% become True Gold 398.84 17.55 20.86% 20.9% owners La Mancha, anti-dilution investment 7.53 8.95% 30.00% 1 Other EDV Total issued shares 84.12 100.00% 49.2% 1 La Mancha currently owns 17,706,157 shares of Endeavour Mining such that it will hold 30.00% ownership following the anti-dilution investment CREATING A PREMIER AFRICAN GOLD PRODUCER 5
Overview of True Gold’s Karma Mine CREATING A PREMIER AFRICAN GOLD PRODUCER 6
Karma Heap Leach Project – Overview 110k – 120k oz/year at AISC/oz ~$700 (years 1-5) – 90% owned by True Gold – Mine is currently in construction, estimated at +96% complete – Simple, open pit mining, heap leach processing (4Mtpa) in semi-arid location with flat terrain – Resources of 75.2Mt at 1.08 g/t containing 2.6Moz plus Inferred of 65.2Mt at 1.13 g/t containing 2.4Moz 1 – Long life of 11 years based on Reserves (33.2Mt at 0.89 g/t containing 949koz) and North Kao deposit (inferred, adds 2.5 years to mine life) 1 – Shallow and free digging material – no blasting required – and low strip ratio – Low power requirements (~4MW) with six diesel gen-sets Mining at Goulagou II, Feb 2016 Komatsu PC3000 excavator – Water supplied by barrage on river 4 km south of plant; pumped to holding ponds at Komatsu 785 Haul Truck site – Total available financing sources of US$174 million, of which US$19 million remain undrawn: • US$44 million equity financing at CDN$0.40 (Feb 2014) • US$120 million Franco Nevada / Sandstorm gold stream (Aug 2014) with US$105 million drawn • US$10 million Auramet loan (Jan 2016) with US$6 million drawn – Cash on hand is US$20 million (as of Feb 2016) – Remaining project spend estimated at less than US$15 million Construction Schedule: Key Dates – First gold pour – late-March/early-April 2016 – Official opening in April / May 2016 Heap leach agglomeration drum, Feb 2016 1 Please refer to www.truegoldmining.com for additional details on Karma’s mineral resources and reserves CREATING A PREMIER AFRICAN GOLD PRODUCER 7
Karma Project – Site Plan CREATING A PREMIER AFRICAN GOLD PRODUCER 8
Karma Project – Exploration Upside 70.5m @ 1.9 g/t – 6 deposits: GG2, Rambo, Kao, North Kao, GG1, and Nami 7.1m @ 6.6g/t – Only 7 of 45 targets drilled to date, showing positive results: • Watinoma (70.5m @ 1.9 g/t) • Rambo West (22.5m @ 2.4 g/t) 16.3m @ 0.9 g/t • Yabonsgo (5.6m @ 12.6 g/t) • Rounga (16.3m @ 0.9 g/t) 6.0m @ 29.5 g/t • Anomaly B (76.0m @ 0.5 g/t) • Soulou (7.1m @ 6.6g/t) • North Nami (6.0m @ 29.5 g/t) 5.6m @ 12.6 g/t – Strong potential for adding near-surface oxide resources within trucking distance of the heap leach processing facility 22.5m @ 2.4 g/t 76.0m @ 0.5 g/t CREATING A PREMIER AFRICAN GOLD PRODUCER 9
Overview of Endeavour Mining CREATING A PREMIER AFRICAN GOLD PRODUCER 10
Endeavour Overview 4 producing mines at low AISC – Sustained operational performance, having constantly increased production and decreased costs over past 4 years Tabakoto Mine – 2016 production to increase to 535-560koz, Bamako from 518koz in 2015 Ouagadougou Houndé Project Youga Mine (Sold) – 2016 AISC to decrease to US$870-US$920/oz, from <US$922/oz in 2015 – Attributable 2P reserves of 4.6 Moz Conakry – Attributable M&I resources of 7.9 Moz Freetown plus 1.7 Moz Inferred Ity Mine and CIL project Attractive project pipeline Agbaou Mine Monrovia Accra Lomé – Houndé Project fully permitted and construction ready Nzema Mine Abidjan – Ity CIL Project feasibility study expected mid-2016 operations office Strong Balance sheet – Net debt reduced by 44%, to US$143m as at end of 2015 – Financing sources include $110m of cash, $110m of undrawn RCF, $75m in-principle commitment from La Mancha (Naguib Sawiris), and cash flow generation CREATING A PREMIER AFRICAN GOLD PRODUCER 11
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